CAPE News

States Assessing Impact of Federal 529 Change

February 1, 2018 -- The massive tax reform package that Congress approved last December included a change in 529 college savings accounts to allow annual withdrawals of up to $10,000 to cover tuition in elementary and secondary schools. Now a number of states are scrambling to figure out exactly what that change might mean for taxpayers who have 529 accounts that also benefit from state tax breaks.

In states that have no tax provisions relating to college savings accounts, the issue is straightforward. Deposits into the accounts are not deductible for federal tax purposes, but earnings accumulate tax free at the federal level if used for qualified expenses. Since K-12 tuition is now a qualified expense, withdrawals for tuition up to the allowable annual limit may be taken without incurring any federal tax.

But with state 529 plans, it could be a different story. States generally allow 529 plans to grow free of state tax, and some even provide state tax deductions or credits for all or part of the contribution to a college 529 account. But will states allow for credits, deductions, and tax-free growth if funds are used for elementary and secondary tuition? Will families incur a state tax penalty if they withdraw 529 funds for K-12 tuition? Those are exactly the issues that states are actively trying to figure out. Some have already arrived at answers.

CAPE Announces New Director

January 4, 2018 -- The board of directors of the Council for American Private Education (CAPE), a coalition of 22 national organizations (listed here) serving private elementary and secondary schools, announced today the appointment of Michael Schuttloffel as executive director effective July 1, 2018.

In accepting the position, Schuttloffel, currently the executive director of the Kansas Catholic Conference, called CAPE, "an organization with a respected past and a promising future for serving the religious and independent school community in the United States.” He said he was looking forward to helping CAPE expand its sphere of influence in preserving and promoting educational pluralism.

One immediate focus will be affirming the vital role of private schools in American education and their significant contributions to educating the public and advancing the common good. “CAPE will continue to promote the rights of parents to educate their children in the school of their choice and to protect the right of private schools to fulfill their unique missions,” he said.

New Tax Law Affects Private Education

January 2, 2018 -- The tax bill that President Trump signed into law December 22 benefits thousands of families with children in religious and independent schools and positively resolves several issues of concern to the private school community.

Prior to the bill’s passage, CAPE invited voters to contact Congress about four specific tax-related issues, all of which were favorably addressed in the final legislation.

At the top of the list was a proposal to expand popular college savings accounts, known as 529 accounts, to allow—starting in 2018—withdrawals of up to $10,000 annually to cover tuition in elementary and secondary schools.

New Mexico Textbook Battle

December 1, 2017 -- The New Mexico Association of Nonpublic Schools (NMANS), a state affiliate of CAPE, is at the center of a battle about a provision in the state’s constitution that discriminates against students in private schools.

At issue is whether the New Mexico Supreme Court ruled correctly when in 2015 it determined that providing state-purchased textbooks and other instructional materials to students in private schools was unconstitutional.

Article XII, Section 3 of the New Mexico Constitution says that no state funds “shall be used for the support of any sectarian, denominational or private school, college or university.” Essentially similar language, known as Blaine amendment language, exists in the constitutions of 38 states.

Military Families Support School Choice

November 1, 2017 -- America’s military servicemembers are strong supporters of school choice.

A report published last month by EdChoice found that military households that were given a description of various school choice programs were far more likely to support such programs than oppose them. Seventy-two percent of respondents supported education savings accounts (ESAs), 64 percent supported school vouchers, and 63 percent supported tax-credit scholarships (TCSs). Only 15 percent of military households opposed ESAs, while only 27 percent opposed vouchers, and 23 percent TCSs.

The report found the “magnitude and intensity” of military support for choice programs “surprising” and suggestive of “military parents’ strong desire for better access to school choice options.”

Big Blue Illinois Enacts School Choice Legislation

October 2, 2017 -- School choice advocates across the country have been collectively celebrating landmark scholarship tax credit legislation that Illinois Governor Bruce Rauner signed August 31. (Photo: Office of the Governor)

Although 17 other states have similar programs, this was the school choice movement’s “first victory in a big and overwhelmingly Democratic state,” according to Scott Jensen, senior government affairs advisor for the American Federation for Children (AFC). “Hopefully, this victory for children in the big blue state of Illinois, will encourage other large Democratic states to embrace school choice,” he added.

The Illinois program provides tax credits to individuals and corporations that donate to organizations that award scholarships to students to attend private schools. The tax credits will be worth 75 percent of the donation’s value, so a $1,000 donation will yield a tax savings of $750. Up to $75 million in tax credits will be issued each year, translating into $100 million in scholarships. The legislation allows individual donors to direct their contributions to particular types of schools or even a particular school, but prohibits corporate donors from doing so.

President Signs 2017 Consolidated Appropriations Act

May 5, 2017 -- President Trump today signed a $1.1 trillion bipartisan spending bill, called the Consolidated Appropriations Act. The bill funds government programs through September 2017.

The following table provides funding levels (column marked "FY 2017 Final") for key programs affecting private school students and teachers, and compares them to actual funding levels in FY 2016 as well as to levels originally proposed by former President Obama in his FY 2017 budget.

Keep in mind that most education programs are “forward funded,” which means the FY 2017 levels will determine funding for programs in the 2017-18 school year.